New Delhi: The Supreme Court said on Wednesday that the capital market regulator was free to freeze the accounts and seize properties of two Sahara group companies for defying court orders by not refunding Rs.24,000 crore to investors.
The apex court also asked the Securities and Exchange Board of India (Sebi) why it hadn’t yet taken action against the companies—Sahara India Real Estate Corp. Ltd (SIRECL) and Sahara Housing Investment Corp. Ltd (SHICL)—in accordance with its 31 August 2012 order that directed the regulator to attach their properties and freeze bank accounts.
“What steps are you taking? You are not taking any action. The judgement tells you what to do, but you are not doing it,” said a bench of justices K.S. Radhakrishnan and J.S. Khehar.
In August, the apex court had directed the two companies to refund around Rs.24,000 crore to their investors within three months with 15% annual interest for raising the amount in violation of rules. The court had said that such economic offences should be handled with an “iron hand”.
The Supreme Court on Wednesday also issued a notice to the Sahara group demanding why contempt action should not be initiated against the companies for not complying with the order. Sahara has to respond to this notice within four weeks.
The market regulator said it was taking action and had issued a notice to the companies and approached a civil court in Mumbai for freezing bank accounts.
The bench said issuing a notice was not enough and that Sebi had to follow last year’s order. “Why you gave notice and did not take action? You have to execute our order,” it said.
The bench also made it clear that the proceedings pending before it on the contempt plea against the companies would not come in the way of Sebi taking action against the group.
The Sahara group said a large portion of this had already been returned to investors before the judgement was delivered.
Senior advocate Ram Jethmalani, appearing for the companies, said that nothing was due and that it would be difficult to deposit Rs.10,000 crore. The first instalment of Rs.10,000 crore was to be paid by the first week of January and the remaining by the first week of this month, according to media reports.
The apex court was hearing Sebi’s contempt petition against SIRECL and SHICL.
Sahara had, on 5 December, got nine weeks’ time from the Supreme Court to pay back the Rs.24,000 crore with interest to more than 30 million investors in its two companies, with an immediate upfront payment of Rs.5,120 crore.
A bench headed by Chief Justice Altamas Kabir had ordered the group to immediately hand over a demand draft for that amount (Rs.5,120 crore) to Sebi and said the balance had to be deposited with the market regulator in two instalments, to be cleared by early February. SIRECL had collected Rs.19,400.87 crore as of 13 March 2008, and SHICL had collected Rs.6,380.50 crore.
The total balance on 31 August was Rs.24,029.73 crore after premature redemptions. By this calculation, the group may have to pay a total of around Rs.38,000 crore, which includes the principal and interest of around Rs.14,000 crore.
Sahara has filed a defamation case in a Patna court against Mint’s editor and some reporters over the newspaper’s coverage of the company’s disputes with Sebi. Mint is contesting the case.